Personal Finance Habits That Lead to Financial Freedom
Achieving Financial Security Happens One Step at a TimeKathy Longo, CFP®, CAP®, CDFA® Monday, 14 March 2022
When it comes to achieving true financial freedom, what are your biggest challenges? While it’s possible that there are external factors hindering you, there’s also a chance that your personal finance habits are keeping you from meeting your goals. Too often, our mindset or our emotions get in the way of our progress. Whether it’s the feeling of being too overwhelmed by the size of the dream or if you’ve picked up unhealthy habits over the years, it’s easy to feel ill-equipped to achieve financial freedom.
However, tackling your money problems doesn’t have to be a herculean task. The journey to achieving major milestones begins with small steps and smart habits that we practice each day. Below are five personal finance habits that can bring you closer to financial freedom.
1. Make investing in your future non-negotiable.
It can be incredibly easy to dip into our savings or take from our nest egg when money gets tight. Thinking about our savings as funds for the future allows us the room to rationalize that we have time to make that money back before we’ll actually need it. But every time you take from your savings to cover a short-term expense, you’re taking steps backward on your journey to achieving your long-term financial goals.
Instead, put a monthly savings and investment amount into your budget so that it’s set in stone. By automatically deducting those contributions each month, you’re allowing yourself to pay your future self first before you budget any funds for extracurriculars or unnecessary expenses.
2. Don’t let your debt rule over you.
Often, having debt or using credit cards gets a bad reputation. The reality is that there’s nothing wrong with using credit cards so long as you’re using them responsibly. When it comes to paying off your debt, it’s smart to start with whichever account has the highest interest rate. And while there is merit in that strategy, you may feel better about paying off your smaller debts first. Being able to watch those small debts drop to zero can give you the confidence to face your larger debts. Regardless of which strategy you prefer, what’s most important is that you stay on top of your debts rather than letting them take over your finances.
If you find that you struggle to stay on top of paying your credit card bills on time, it may be a good idea to limit how often you use your card. Try switching most of your spending to cash or using a debit card that’s directly tied to your checking account. Doing so forces you to be more mindful about what you’re buying and how you intend to pay for it.
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3. Treat your most valuable assets with care.
If you have a habit of ignoring warning signs that could lead to potentially significant expenses, you’re not alone. Many people ignore that small hole in the ceiling because they don’t want to pay to fix the roof or pretend they don’t see the check engine light on the car dashboard. After all, ignorance can be bliss, right? The trouble is, ignoring potential problems will only serve to exacerbate them. Footing the bill for expenses like these is never fun, but taking care of these issues while they’re still small helps you avoid larger bills later on.
4. Gain control of your spending.
Even those who are most dedicated to their budgets slip up from time to time. It’s hard to think about consulting your budget when you’re unexpectedly hit with a sale at your favorite store or see an ad on social media for an item you’ve been eyeing. Yet splurges and impulse purchases like these can add up when they go unchecked. when We’re constantly bombarded with photos of someone who has the next best thing in the age of social media, impulse spending becomes even harder to control.
If you’re someone who is susceptible to this sort of emotional spending, try to limit your exposure to the temptations as much as you can. Turn off ad notifications from any shopping apps you have, unsubscribe from newsletters that encourage you to buy things you don’t need, or try adopting a mantra that forces you to pause and think before you hit that buy button.
Implementing a catchphrase of sorts can help you stay accountable when you’re caught up in the moment. Ask yourself, “Is this [fill in purchase] better than a trip to Europe next year?” or repeat, “Credit card purchases are only for purchases that are $100 or more.” Even having that small pause can curb impulse spending enough to make a difference over time.
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5. Maintain your financial health.
The thing about money is that you can’t just set a plan in place and forget about it. Outside factors are always changing, which means that your financial plans or practices may need to change over time, too. If you’ve gotten a promotion, then you’re going to want to update your budget and increase your contributions to your savings. Or perhaps an opportunity comes up to refinance your mortgage with lower rates. Setting aside time on a bi-monthly or quarterly basis to re-assess your financial situation can help ensure that you’re continuing to make the best money choices for your future.
Financial freedom happens one step at a time.
Life is full of milestones that are marked by expensive costs – buying a house, sending your kids to college, and enjoying a fulfilling retirement, to name a few. All of these things require careful and deliberate planning. They also become much less daunting if you’re smart with your money on a daily basis.
Building a strong financial foundation happens one brick at a time, day after day, throughout your lifetime. By incorporating smart financial habits, you can ensure that you’re putting your best foot forward on the path toward financial freedom.
About the Author
Kathy Longo, CFP®, CAP®, CDFA®
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.